BDO Ltd

▼ BDO Cyprus

EU PERSPECTIVE

Having amended its tax legislation in anticipation of EU accession from 1 January 2003, Cyprus has set up a tax system which is ideally suited both to inbound and outbound EU investors.

The new tax climate offers to the investors:

Low taxation
Extensive double tax treaties network
Exemption from tax in most cases on dividends received
Exemption from tax on profits from sale of shares and securities
Exemption from withholding tax on the repatriation of income either of dividends, interest and on royalties
Access to EU directives

Tax costs play a significant role in investment decisions. Investors aim to maximise after-tax return on investment. Therefore, investment structures which have the least tax leakage are preferred by investors and are recommended by the advisors.

As such, a Cyprus investment vehicle can collect income which is a charge against high tax income. Withholding tax is eliminated or reduced under double tax treaties or under EU directives. The rate of tax in Cyprus is low compared to other EU countries. The income can then be repatriated in any form the investor wishes without withholding tax.

This investment vehicle is suitable both for EU inbound and outbound investments. There are no investment activities which are inappropriate for the Cyprus tax environment. However, there are investment activities which are indeed ideally suited to the Cyprus tax environment such as:

Investment funds
Finance companies
Royalty companies
South Europe, Middle East, Russia and central and eastern Europe headquarter business activities

European enlargement and the accession of Cyprus into the EU in April 2004 opens up a new gate to investors who wish to invest in EU or who wish to invest from the EU.